ELFA President tells Asset Finance International of new lenders entering US industry

MLFI-25 new business volumes (YOY compared)

Month over month, new business volume was down 13% from June although, year to date, cumulative new business volume has increased 4% compared to 2013. 

Receivables over 30 days increased from the previous month to 2.7%, and were up from 1.5% in the same period in 2013.  Charge-offs were unchanged for the fourth consecutive month at an all-time low of 0.2%.

Aging of receivables over 30 days

Credit approvals totaled 79.7% in July, a slight decrease from 80.1% the previous month.  Total headcount for equipment finance companies was up 0.4% year over year.

ELFA president and CEO William G. Sutton, CAE, was bullish regarding the new business figures. He said: “After a solid second quarter that saw an overall increase in US GDP and strong business investment, new business volume in the equipment finance sector continued to hold steady in July.

“Credit performance is mixed: monthly delinquencies were up (as a result of a single respondent-outlier) but charge-offs remained at historically low levels. For now, most ELFA member companies report good, if not spectacular, growth, and conditions appear favorable for this to continue into the late summer and early fall.”

He told Asset Finance International: “The last quarterly Economic Outlook from the Equipment Leasing & Finance Foundation lead us to believe that investment in equipment and software will see an increase of between 2.5% and 3% in new business for 2014. All asset finance sectors were held back by the extremely bad weather in the US in the first quarter – but the second half of the year should show far better growth.”

As elsewhere in the global leasing industry the post-recession recovery is proving uneven amongst differing industrial sectors. Sutton confirmed that, for the US, sectors such as materials handling and railroad financing are doing well whilst other industrial sectors, including construction and computers, are witnessing slower recovery.

Although capital expenditure by corporates is dependent upon many factors, ranging from GDP growth and employment levels to consumer spending, Sutton reports that ELFA members are still experiencing an “anaemic” recovery from the recession.

The US GDP grew by an encouraging 4% in Q2 2014, although Sutton stressed: “There are so many variables at play that the final year’s figure is still uncertain. However, any GDP increase above 3% will see higher growth rates in capital expenditure.”

A good place

ELFA is experiencing a steady growth in new lenders entering the market in the post-recessionary period. “We are seeing regional and community banks increasingly coming into our space and lending for asset purchase,” he said. “They see it as a good place to deploy their capital.”

There is no doubt that the US equipment finance industry has a strong marketing culture and most asset lenders believe that even if a modest increase in capital expenditures occurs the industry could enjoy a stronger increase in new business volume compared to the last two quarters.

Elaine Temple, president of BancorpSouth Equipment Finance backed up William Sutton’s optimism saying: “The month-over-month drop in new business volume was expected as business volume is typically lower in July and August.  The year-over-year growth of 4% is encouraging and reflects that the economy is in a recovery, but a slow recovery.”

Unlike elsewhere globally, the US equipment leasing industry does not seem to have experienced a haemorrhaging of experienced staff during the recession. Sutton explained: “Employment figures in the industry are holding pretty steady. While there certainly were some who exited the industry at the time – those who are left are working harder than ever!”